By Bryan Hay

A decade since the passage of the Affordable Care Act (ACA), health-care costs continue to rise, leaving millions of Americans uninsured or underinsured and financially vulnerable during a global pandemic. 

To address these issues, several state legislatures have sought to go beyond the ACA by exploring and enacting a diverse array of proposals to make health care more accessible and affordable for their residents. When the ACA was first introduced, it included a publicly funded “community health insurance option” that would offer individuals the opportunity to purchase public health insurance coverage offered through state-managed marketplaces in addition to private insurance plans. However, this public option was voted down and never appeared in the final legislation

With little action at the federal level, states are considering public options as a way to improve health care access and affordability for their residents.

In a just-published report by the Roosevelt Institute, a think tank and nonprofit partner to the Franklin D. Roosevelt Presidential Library and Museum in New York, Adam Biener, assistant professor of economics, and Naomi Zewde, assistant professor of health economics at City University of New York’s School of Public Health and Roosevelt Fellow, take a deeper look at state-level efforts to deliver public option proposals and the trade-offs they present. 

Biener, whose research focuses on how Americans use and pay for medical care, took some time from his schedule to discuss the findings of the research.

Explain how a public option works and how state proposals, like the one under consideration in Colorado, may save consumers money.

Individuals not offered health insurance through their employer are not always eligible for public health insurance and must instead shop on their state’s health insurance exchange. Some of these consumers have few plan choices and may even have only one insurer participating in their area, which can expose them to very high premiums. A state could create an additional ‘public’ insurance option that would compete with these insurers and put downward pressure on premiums for all residents, regardless of whether they are enrolled in the public option or a private insurance plan.

Do public option plans offer many choices in coverage plans?

Regulations in the ACA mandate that all plans sold on exchanges cover certain essential health benefits and achieve a certain level of plan generosity. This results in all marketplace plans, including potential public options, being relatively similar.

Can public option plans compete with private plans on the marketplace?

A public option would compete through lower premiums compared with private plans. To do this, the public option would have to reduce the generosity of its benefits, pay medical providers at lower rates compared with private plans, or reduce its administrative costs. These measures may be attainable if the public option could leverage existing structures to operate (such as integrating with state Medicaid programs) or operating as a nonprofit. However, less generous benefits or lower provider reimbursements can make the plan less desirable for consumers if fewer services or physicians are covered by the plan.

Could public options place any additional strains on states’ health care systems?

Recent evidence shows that consumers are very price sensitive, and a public option plan even moderately cheaper than private alternatives may induce many consumers to switch plans. If these consumers tend to be younger, healthier, or otherwise less inclined to use expensive health care, this can lead to premium increases as private plans disproportionately cover sicker and higher cost enrollees.

Can states deliver an ironclad promise to lower costs and increase access for consumers?

Some states, including Washington and Colorado, intend for private insurance companies to administer their public option. These options would be legislated to pay providers less than their competition, but still significantly higher than public payment rates under Medicare. These plans would be minimally disruptive while being somewhat more affordable for consumers.

Other states are considering public options that would compete more aggressively on cost. In our report, we explain how these plans, including Medicaid buy-ins, could significantly increase affordability. However, they may be unable to recruit providers to accept significantly lower payments, and can run the risk of disrupting the private insurance market.

What surprised you the most during the course of this research?

In studying different states’ approaches, it was refreshing to see the careful thought state legislators have applied when designing their public option proposals. There is no one-size-fits-all approach, and states are responding to the unique needs of their residents and designing options that maximize affordability while balancing concerns about narrow provider networks. For example, New Mexico is considering a Medicaid buy-in as there is already a robust network of providers who treat Medicaid patients, and reimbursements are higher relative to other states.

What led to your collaboration with the Roosevelt Institute?

The report evolved from discussions Naomi and I had at the American Society for Health Economists annual conference last year. We were interested in applying earlier research about how public insurance reimburses physicians and hospitals to see how significantly a public option could lower health care costs. We hope this report will be instructive for state policymakers who are considering introducing a public option, and plan to continue studying the potential efficacy and limitations of this policy tool.

 

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